Economist & Assistant Director for Moody’s Analytics Bernard Yaros explained, “It would create a lot of snowballing effects throughout the economy. We estimate that the unemployment rate would surge to 9%, 6 million jobs would be lost.”
The debt limit is the maximum the federal government is allowed to borrow to pay for last year’s bills.
U.S. Treasury Secretary Janet Yellen sent an open letter to Congress to urge them to raise that borrowing limit, and in a Wall Street Journal op-ed, she warned if it does not happen, nearly 50 million seniors could stop receiving Social Security checks for a time, U.S. troops could go unpaid, millions of families who rely on the monthly Child Tax Credit could see delays and it could have a lasting impact on interest rates, meaning you would pay more for mortgage payments, car loans, and credit card bills.
Yaros said, “It will come as a very negative surprise to households. And in order to make up for this loss, sudden loss of income, they’re going to have to pull back on spending.”
According to the U.S. Treasury, the U.S. currently has nearly $29 trillion in debt. Roughly $8 trillion of that is from the Trump era, including the early COVID stimulus plans. That’s what Congress is faced with paying for right now.